today i heard on the news that a philippina woman was jailed for lending out money (up to $300) to other pinoys and charging a 20% interest. here's my question, at which point is one considered a micro-financier and when is one a loanshark? Prof Muhammad Yunus received a nobel peace prize in 2006 for setting up the grameen bank, a microfinance institution that loaned out small sums of money to mainly women, and charged them (are you ready for this?) an interest rate of 20%, far higher than commercial banks. now, i am in no way undermining his receiving the peace prize, i think yunus did great, probably more so for the empowerment of women than for the alleviation of poverty in bangladesh. the other difference between the jailed woman and yunus, she lent with her own money while yunus relied on donors' cash.
also, yunus is operating a registered entity that has since gained recognition worldwide. yet it puzzles me that a microfinance institution has branches and related institutions in at least 27 countries, and in 2006, reported a net income of 20.3 million USD. again, don't wrong me, i am a fan of microfinance and believes it is a sustainable tool towards alleviating extreme poverty. however, a net profit of USD20.3m is no mean feat. i'm pretty sure that Citigroup, what with the sub-prime crisis and bad credit, has troubles reaping USD20.3m (disclaimer: this is a joke, i'm not sure how much citigroup makes, but i'd be worried if they don't make at least 20.3m).
in any case, as much as i love microfinance and the potential of such ventures, especially in southeast asia, i'm doubtful now of the grameen bank. this is perhaps an example of how power corrupts. i haven't decided for myself is yunus is a corrupt individual (he probably isn't), i'm sure his intentions were good and money just accidentally rolled in through the years, and i'm glad some families in bangladesh sleep easy tonight because they took out a micro-loan some years ago. as a maybe-donor, though, i'd probably look for alternative avenues to put my money because clearly, the grameen bank has 20.3m more USD to loan.
let me know if you know of some small NON-PROFIT microfinance institution in southeast asia that gives out loans. i only know of a couple in cambodia, but those are tied to the cambodian central banks, and i have other reservations about that.
